NFC May Depend on Merchants Embracing Mobile Marketing

Local merchants will be key in spurring the adoption of near field communications but they won’t be swayed simply by the idea of NFC as a credit card replacement, said the CEO of the company that provides the hardware and software behind most NFC readers. The real reason merchants will adopt so-called near field communications technology for mobile payments is the promise of more one-to-one mobile marketing through NFC-enabled smartphones, Michael Mullagh, CEO of Vivotech said. And with merchants on board, the hope is that consumers will follow.

“Payments is interesting but it does very little for merchants,” Mullagh said. “What turns them on is selling more stuff at a lower cost to a more loyal base.”

Mullagh said NFC’s promise is in allowing a merchant to build a better relationship with a customer through transactions on a smartphone. When consumers check out, they can connect their transaction to loyalty cards and programs and can get additional offers on in-store items. They can also check-in to locations using NFC as well to find deals and coupons. When tied into location-based offers, merchants can draw in nearby users for deals, which they can verify through NFC. That will help produce more qualified customers and allow merchants to shift their marketing dollars to more targeted mobile channels.

“Merchants see the power of the smarpthone and shopping applications and virtual e-commerce applications on the mobile phone. They know the future is mobile. It’s all a matter of how to make it happen,” Mullagh said.

This gibes with what my colleague Colin Gibbs has been writing about on NFC. He said NFC is much more than payments and adoption will come down to NFC-enabled applications that provide real value to consumers. It may not be exciting as the idea of mobile payments but it shows the huge shift that the smartphone is creating in marketing by local merchants. We’re already seeing the power of mobile apps such as Shopkick, Foursquare and Gowalla and others to connect consumers with merchants. By adding NFC, it may make it easier for local businesses to establish and build relationships with consumers, which in turn can shift the way businesses spend their marketing dollars.

But it’s not just about merchants. If done right, consumers will also see the benefit too when merchants are able to tailor offers to them and give them discounts when they’re most interested in shopping. That’s been one of the problems with NFC before. It’s been thought of in terms of this money-making opportunity for so many players in the ecosystem but it really does come down to the need for merchants and consumers to get tangible benefits out of it before things take off. We’re hearing more messaging on the wider benefits of NFC from people like Google’s Eric Schmidt and that’s important. Otherwise, NFC is more about the novelty of waving a phone at a reader.

Vivotech, which is eyeing a possible IPO next year, is in a good position to comment on the NFC debate and has a lot to gain as the technology grows. It made a bet on NFC in 2001 and is a leader in providing the point-of-sale terminals that businesses and merchants use. The company has shipped 800,000 readers globally including 600,000 in the U.S. at 150,000 locations including McDonalds, Whole Foods and in New York taxis. The company sees a bright future ahead, especially as smartphone manufacturers, network operators, web giants like Google and financial institutions gear up to offer NFC-based payment solutions.

But with so many people competing this year and jockeying to become the go-to NFC payment provider, Mullagh expects there’s going to be a lot of shaking out and settling that has to happen before mainstream consumers get on board. My colleague Kevin had a good report on the battles among the major NFC players. Mullagh said wider adoption by consumers will likely happen next year as some of the early battles play out and NFC players learn to cooperate with each other. We’re already seeing that with NFC trials underway between Google, Mastercard and CitiGroup.

Mullagh said even though NFC is still not a mainstream phenomenon and this year won’t provide the break-out some had hoped, he said the momentum is squarely behind the technology now.

“We’ll see some more jostling with early trials and small scale deployments from a whole variety of players,” he said. “But it’s not just tests anymore; people are committed now.”